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Leasing a car can be a helpful option if you need access to a vehicle for a limited time and don’t want to buy one. However, in some cases, you might want to end your lease early—for example, if you can’t afford the payments or simply don’t need the car anymore.
If you’re wondering how to get out of a car lease, here’s what you should know.
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What Is a Car Lease?
Unlike buying a vehicle, a car lease essentially lets you rent one for the long term. The dealership or leasing company that leased the car to you owns the vehicle and allows you to drive it for a period of time. A traditional lease typically lasts two to five years, though you might be able to get a short-term lease for less time in some cases.
Because you aren’t purchasing the car, your upfront costs will likely be less in comparison—for example, you generally won’t have to put any money down unless you have bad credit. You’ll also typically pay less per month on a lease than on an auto loan. The average car loan payment for a new vehicle was $648 in the first quarter of 2022 compared to an average lease payment of $522, according to Experian.
Once your lease is up, you can simply return it to the dealer or leasing company, or you could consider buying the car from the leasing company if your agreement allows it.
Can You Get Out of a Car Lease?
Yes, there are a few ways to get out of a car lease early. Some lease-breaking strategies are more expensive than others—so be sure to carefully consider all of your options and look over your lease contract to understand what penalties or consequences you might face.
4 Ways to Get Out of a Car Lease
If you want to end your car lease early, here are four options to consider:
Car leases often provide an early termination option if you want to break the lease. You’ll typically have to pay a termination fee, which is usually the difference between the car’s estimated worth at the end of the lease and what you still owe. This is known as residual value.
There could also be additional fees, such as any applicable taxes or fees for vehicle disposal or transfer. The federal Consumer Leasing Act requires that certain lease costs and terms be disclosed—so be sure to check your lease beforehand to get an idea of what you’ll end up paying. You can also call your leasing company to ask how much it will cost to terminate your lease early.
Breaking your lease comes with substantial costs, so it’s a good idea to treat it as a last resort. Also keep in mind that cars generally depreciate the most in their first year or two, so the further you are into your lease, the lower your overall cost will likely be.
You could also consider transferring the car and remaining portion of your lease term to a different lessee. Also known as lease assumption or lease takeover, a lease transfer will likely be a less expensive option compared to breaking your contract as you won’t be subject to early termination fees.
If you want to transfer your lease, you’ll first need to check with the dealer or leasing company to make sure it’s allowed. If it is, you’ll then have to find someone to take over the lease.
While you can search for a new lessee yourself, it’s usually an easier option to use a third-party platform like LeaseTrader or QuitALease.com. These platforms help connect people selling their leases with people who want to take over a lease and streamline the transfer process. You can generally expect to pay $100 to $350 to utilize one of these companies’ services. Other potential costs can include a lease transfer fee, credit check fee and shipping charges.
Also keep in mind that depending on your lease agreement, you might be allowed to have another person fully assume responsibility for the lease, or you could be required to keep your name on the lease while the other person takes over payments. In the latter case, you could be liable if the new lessee fails to make their payments—so be sure to understand ahead of time what you’re agreeing to.
Many leases provide a buyout option, which might be a good choice if you would like to keep the car you’ve been driving or want to sell it on your own. While you’ll generally get the best deal if you wait until your lease ends to buy the vehicle, you might opt for an early buyout if you’d prefer to end your lease agreement ahead of schedule—though keep in mind that this could come with fees or finance charges.
Before you approach the dealer or leasing company, make sure to do your research to see what the vehicle is worth and what a reasonable price would be. Then check your lease agreement to see what you’d have to pay to buy the car and whether it’s worth it.
If you decide to continue, you’ll likely need to apply for a car loan to cover the purchase. While the dealer or leasing company might offer to finance the vehicle, be sure to take the time to shop around and compare your auto loan rates and terms from as many lenders as possible to find the best deal.
Lease Trade In
In some cases, you might be able to trade in your current car toward a new vehicle. While this can be a convenient option, it can also come with early termination fees—so be sure to check your lease contract or contact the dealer or leasing company to see.
If you meet the credit score requirements, the dealer will pay off your remaining lease balance and purchase the car from the other dealer or leasing company. Note that if the car’s residual value is more than the dealer’s buyout amount, you receive a credit for the trade. But if the buyout amount exceeds the car’s residual value, you’ll have to either pay the difference or roll it into your new lease or loan.
Pros and Cons of Ending Your Car Lease Early
If you want to get out of your car lease, it’s important to carefully weigh the pros and cons of each option to see which one is right for your situation.
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